US corn stocks exceed market expectations, drags down fertilizers

30 September 2011 16:37  [Source: ICIS news]

US corn stocks beat expectationsHOUSTON (ICIS)--US corn futures were trading slightly lower on Friday following release of a US Department of Agriculture (USDA) report indicating that corn stocks were higher than the market expected, but still down 34% from a year earlier.

Old crop corn stocks in all positions on 1 September totalled 1.13bn bushels, down 34% from the same time a year ago, the USDA said in its monthly crop stocks report

However, the 1.13bn bushels of corn were above market consensus of 948m bushels.

"The higher starting point for the 2011/2012 crop is a bearish indicator for the fertilizer shares, since it has negative implications for corn price," said Charles Neivert, fertilizer analyst with investment firm Dahlman Rose.

"There tends to be a strong relationship between the price of corn and both the price of fertilizer and the fertilizer company shares. A disproportionately negative impact may fall on nitrogen producers, since they have the most leverage to the corn crop," Neivert said.

In fact, shares of nitrogen fertilizer producer CF Industries performed much worse than the overall market. CF was down 7% as of 11:24 hours New York time (15:24 GMT). The major US indices were down less than 1%.

Of the total corn stocks, 315m bushels are stored on farms, down 35% from a year earlier. Off-farm stocks, at 813m bushels, are down 33% from a year ago.

Old crop soybeans stored in all positions totalled 215m bushels, up 42% from a year ago.

($1 = €0.74)

By: Frank Zaworski
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